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Teske v. Wilson Mutual Insurance Co.

Supreme Court of Wisconsin

June 4, 2019

John Teske, Julie A. Teske, Katherine Teske an Elle Teske, Plaintiffs-Appellants,
v.
Wilson Mutual Insurance Company, Defendant-Respondent-Petitioner. United HealthCare Insurance Company, Subrogated Party-Plaintiff,

          Oral Argument: March 18, 2019

          Circuit Court Fond du Lac County (L.C. No. 2016CV500) Peter L. Grimm Judge.

          For the defendant-respondent-petitioner, there were briefs filed by Corrado Cirillo and Olsen, Kloetr Gunderson & Conway, Sheboygan. There was an oral argument by Corrado Cirillo.

          For the plaintiffs-appellants, there was a brief filed by Keith E. Trower and Warshafsky, Rotter, Tarnoff & Bloch, S.C., Milwaukee. There was an oral argument by Keith E. Trower.

         ¶1 ANN WALSH BRADLEY, J.

         The petitioner, Wilson Mutual Insurance Company (Wilson), seeks review of an unpublished decision of the court of appeals reversing the circuit court's order that determined the Teskes' claims were barred by the doctrine of claim preclusion.[1] Wilson contends that the circuit court correctly dismissed the Teskes' claims because the claims could have been brought in a prior action between the same parties.

         ¶2 Specifically, Wilson asserts that claim preclusion applies to bar all of the plaintiffs' claims because all three elements of claim preclusion are established. It contends that the parties to the first and second actions were the same, or were in privity. Wilson argues next that identity of causes of action is present because the claims in this lawsuit and the previous lawsuit arose from the same common nucleus of operative facts. Finally, it advances that there was a final judgment on the merits in the first action.

         ¶3 We conclude that claim preclusion bars the claims brought by Julie, Katherine, and Elle Teske in this second action. Accordingly, we reverse that part of the decision of the court of appeals that allowed their claims to proceed. However, we are evenly divided as to whether claim preclusion bars the claims brought by John Teske. As a result, we affirm the court of appeals' decision that allowed John's claims to proceed.[2]

         I

         ¶4 This case arises from a car accident in Fond du Lac County on November 24, 2013. The underlying facts of the accident are undisputed.

         ¶5 Emily Teske was driving a vehicle in which her mother, Julie, and two sisters, Katherine and Elle, were passengers. John Teske, Julie's husband and Emily, Katherine and Elle's father, was not in the car. Julie, Emily, Katherine, and Elle were all seriously injured after their vehicle was rear-ended by a car driven by Sabrina Srock. The force of the collision propelled the Teskes' car into the oncoming lane, where it struck a vehicle driven by Patrice Rog, who was also injured.

         ¶6 Srock carried an automobile insurance policy with State Farm that provided a policy limit of $100, 000 per person and $300, 000 per accident. The Teskes carried a policy with Wilson, which as relevant here contained underinsured motorist (UIM) coverage with a policy limit of $500, 000 per person, per accident. Importantly, the Wilson policy also incorporated a "reducing clause" which "permits a setoff from the insured's UIM coverage [in] the amount paid to the insured by the underinsured tortfeasor."[3]

         ¶7 The accident resulted in two separate lawsuits. In the first action, Julie Teske brought a negligence claim against Srock and her insurer, State Farm, in Milwaukee County circuit court.[4] Katherine and Elle were also named as plaintiffs, although as minors they were represented by a guardian ad litem.

         ¶8 Pursuant to a minor settlement agreement, [5] the parties settled the lawsuit and agreed how the money from the various insurers would be split. State Farm tendered its $300, 000 policy limit, but the amount was insufficient to cover the full medical expenses incurred by Rog and the Teskes. The amount was ultimately split between the Teskes and Rog, with the Teskes receiving $255, 000 and Rog receiving $45, 000.

         ¶9 Applying the policy's reducing clause, Wilson agreed to pay the Teskes $245, 000. It arrived at this amount by beginning with its $500, 000 UIM policy limit and subtracting the $255, 000 the Teskes received from State Farm.

         ¶10 Each member of the Teske family received proceeds from the insurance settlement as set forth in the minor settlement agreement. Specifically, Julie received $264, 000, Katherine received $40, 000, Elle and Emily received $35, 000 each, and John received $20, 000.

         ¶11 Also incorporated into the minor settlement agreement was a "Pierringer Release."[6] Pursuant to the Pierringer Release, the Teskes released all of their claims against Srock and State Farm. The Teskes partially released Wilson to the extent of the $245, 000 it paid. However, they explicitly "reserved the right to pursue further claims for UIM benefits against [Wilson] and [Wilson] has not waived any defenses to such future claims." The minor settlement agreement was signed by each member of the Teske family, [7] as well as a representative of Wilson, and approved by the circuit court.

         ¶12 After releasing Srock and State Farm, Julie, Katherine, and Elle amended their complaint and added Wilson as a defendant. At issue in this amended declaratory action was whether the reducing clause in the Wilson policy was properly applied. Venue was transferred to Sheboygan County, and the Sheboygan County circuit court[8] determined that the reducing clause was unambiguous, valid, and applicable. Julie, Katherine, and Elle appealed and the court of appeals affirmed. Teske ex rel. Harding v. Wilson Mut. Ins. Co. (Teske I), No. 2015AP208, unpublished slip op. (Wis. Ct. App. Aug. 19, 2015). The same three Teskes petitioned for review, which this court denied, thus ending the first action.

         ¶13 Following the resolution of the first action, John, Julie, Katherine, and Elle brought this second lawsuit. They alleged that Emily, as the driver at the time of the accident, was negligent in the operation of the Teske vehicle. However, they sued Wilson directly as Emily's insurer pursuant to Wisconsin's direct action statute.[9]

         ¶14 Moving for summary judgment, Wilson argued that the Teskes' negligence action was barred by the doctrine of claim preclusion. Focusing on the first two elements of claim preclusion, identity of parties and identity of causes of action, it asserted that there was identity between the parties in both lawsuits. It based this argument on the observation that Wilson, Julie, Katherine and Elle were all named plaintiffs in the first action. Wilson also observed that although John was not formally named a party in the first action, he participated and received proceeds from the minor settlement agreement.

         ¶15 Wilson also contended that there was identity between the causes of action in both lawsuits. Specifically, it argued that the actions arose from a single event-the November 24, 2013 accident.[10]

         ¶16 The circuit court agreed with Wilson and granted the motion for summary judgment. It determined that "there is no dispute as to the technical identity between the parties given the captions and pleadings of the suits and the involvement of the parties in the ...


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